Over at National Review Online this morning, I ask how the Ronald Reagan of 1980 would have fared in today’s Iowa caucuses given his views on how to tackle illegal immigration (“GOP Candidates Betray the Spirit of Reagan on Immigration”). My conclusion, based on the current mood of many Republicans, is that Reagan would have been the target of a barrage of attack ads:

In April 1980, when Ronald Reagan was competing in the presidential primaries, he rejected the building of a wall between the United States and Mexico: “Rather than talking about putting up a fence, why don’t we work out some recognition of our mutual problems? Make it possible for them to come here legally with a work permit — and then while they’re working and earning here, they pay taxes here. And when they want to go back, they can go back. And open the border both ways by understanding their problems.”

If a Republican presidential candidate said such a thing today, he or she would suffer withering criticism for being soft on illegal immigration. Instead, we hear Reagan’s successors talk about implementing national ID cards, imposing intrusive regulations on the labor market, raiding farms, factories, and restaurants, and harassing small-business owners trying to survive in this tough economy, all in the name of chasing away hard-working immigrants.

The unhealthy competition among the current Republican candidates to sound tough on immigration also risks alienating millions of Hispanic voters who could otherwise be persuaded to support the party. If conservatives want to rediscover the more optimistic, inclusive, reform-minded spirit of Reagan, they should be talking about real immigration reform, not about spending more money and enacting more sweeping regulations to enforce a fundamentally flawed system.

The news right now is full of retrospective stories about 2011. Not to be left out, here are a few observations on the real if modest progress made in 2011 to expand the freedom of Americans to trade in the global economy. (I’ll add links along the way to related Cato work.)

After four years of stalemate, this fall Congress passed and President Obama signed legislation implementing three pending free-trade agreements, with South Korea, Colombia, and Panama. When fully implemented, these FTAs will eliminate just about all barriers to trade with three key allies. The U.S. International Trade Commission estimates the three agreements will boost U.S. exports and output by more than $12 billion.

Just as importantly, their passage signals that the two major parties can still work together to promote trade liberalization. Republicans voted overwhelmingly for the agreements, including freshman members connected to the Tea Party movement, and enough Democrats joined in to pass them all by comfortable margins. President Obama, to his credit, found a political path to support the agreements despite the opposition of his labor-union base.

With the passage of the agreements with Panama and Colombia, the Pacific Coast of the Americas has been effectively transformed into a free-trade area. (Ecuador is the lone hold-out.) When combined with NAFTA, CAFTA-DR, and FTAs with Peru and Chile, the United States now has free-trade agreements with neighbors that account for 87 percent of our two-way trade in the Western Hemisphere. The vision of a free trade area of the Americas from the Yukon to Tierra del Fuego has been effectively realized.

2011 also witnessed the United States and Mexico sort out the dispute over cross-border trucking—the last piece of unfinished business from the 1994 North American Free Trade Agreement. Under a pilot program put forward by the Obama administration, safety-certified Mexican trucks can now deliver goods within the United States, and U.S. trucks can do the same in Mexico. Now that the U.S. government is finally complying with its commitments, Mexico lifted sanctions on $2.4 billion of U.S. exports. This is real progress for economic freedom, the rule of law, and showing respect for our 100 million Mexican neighbors.

The United States and eight other Pacific Rim nations made substantial progress in negotiating the Trans-Pacific Partnership, a regional agreement that could bear fruit in 2012 or 2013. Japan, Canada, and Mexico have expressed interest in joining the talks.

Even the hapless World Trade Organization managed a bit of forward progress this year. While the Doha round of talks remains comatose, its 153 members agreed at its ministerial meeting this month in Geneva to admit Russia as a member next year. And a critical mass of its members, including the United States, agreed at the same meeting to open their government procurement to more international competition.

Free trade made progress this year in practice as well as in policy. Through the first three quarters of 2011, American exports of goods and services were up 16 percent compared to the same period in 2010; imports were up 15 percent. Compared to gross domestic product, U.S. exports have reached a record high of 18.8 percent. The ratio of imports to GDP has yet to return to its pre-recession peak, but it is also expanding once again. As government barriers continue to recede, Americans are choosing everyday to trade more and more in the global marketplace.

Our freedom to trade remains less than it should be. The U.S. government continues to impose an array of barriers on trade and investment, including quotas on imported sugar, regressive tariffs on shoes and clothing, unfair and economically damaging anti-dumping duties, and restrictions on foreign investment in media, inter-coastal shipping, and air travel (all of which I describe in Chapter 9 of my 2009 book Mad about Trade). But those can all be resolutions for 2012.

For now, let all of us who favor economic liberty and limited government take due satisfaction in the welcome expansion of our freedom to engage in commerce with our fellow human beings.

A powerful trend in today’s more globalized world is the growing competition among nations to attract and keep human capital — people with the skills and education necessary to make a modern, open, market economy hum.

Nobody has done a better job of describing this phenomenon than British journalist Robert Guest in his new book, Borderless Economics: Chinese Sea Turtles, Indian Fridges, and the New Fruits of Global Capitalism, just out from Palgrave Macmillan.

Guest is the business editor of the Economist magazine. He’s traveled widely in the United States and across the world. He has a keen understanding of the market forces shaping the global economy today, as well as a reporter’s eye for interesting people, places, and companies that tell the story.

The author summarized Borderless Economics in a recent Wall Street Journal op-ed, and the book was favorably reviewed in the same newspaper this week. The reviewer, Katherine Mangu-Ward of Reason magazine, highlighted an immediate application of the book’s thesis to U.S. immigration policy:

Mr. Guest notes that the U.S. annually awards only 85,000 H‑1B visas for highly skilled workers; more than that number have been known to apply on the first day that applications can be submitted. America is strong because it has long been the nation richest in the resource that matters most: talent. Yet the U.S. government every year turns away tens of thousands of the most talented, motivated people in the world.

The Cato Institute hosted a book forum for Robert Guest in November, with comments from Edward Alden of the Council on Foreign Relations. You can view the event here.

The U.S. Treasury Department finally released its overdue semiannual “Report to Congress on International Economic and Exchange Rate Policies” yesterday. I’ve been reading through the informative report this morning so you won’t need to. Two quick comments:

First, the report declined, once again, to brand China a “currency manipulator,” and for good reason. The term is needlessly confrontational. As the report documents, while the Chinese currency is probably still undervalued, the Chinese government has been taking concrete steps toward a more flexible exchange-rate regime. Since it began its currency reforms in July 2005, the renminbi has appreciated 40 percent on a real (inflation-adjusted) basis against the U.S. dollar. And 40 percent just happens to be the upper range of the revaluation that was demanded by Sen. Chuck Schumer (D‑NY) and other critics of China trade back then. They should declare victory and move on to more pressing economic problems, such as cutting federal spending and promoting private-sector growth.

Second, the report repeats the common but false assumption that a shrinking trade deficit is necessarily good for economic growth, and a rising deficit bad. From p. 6 of the report, we read:

Trade was also a bright spot in the third quarter [of 2011], as exports once again grew faster than imports. The resulting decline in the net export deficit contributed 0.4 percentage point to real GDP growth.

This reflects the simplistic Keynesian assumption that rising imports are a drag on growth because they merely replace domestic production. The truth is almost exactly the opposite, as I documented in my Cato study earlier this year titled, “The Trade-Balance Creed: Debunking the Belief that Imports and Trade Deficits Are a ‘Drag on Growth’.”

The truth, in theory as well as practice, is that a rising level of imports typically reflects rising domestic demand by both consumers and industry. Imports fuel U.S. production by supplying more raw materials, intermediate supplies, and capital machinery at competitive prices. That is why the U.S. economy has typically grown much faster during periods of rising trade deficits compared to periods of shrinking deficits. True to form, the first three quarters of 2011 saw declining GDP growth even though, according to the Keynesian creed, the decline in the trade deficit was a supposed “bright spot.”

Earlier this year, the Cato Institute published this paper, which describes the self-flagellating nature of the U.S. antidumping law. Nearly 80 percent of all U.S. antidumping measures imposed between 2000 and 2009 (130 of 164 measures) restrict imports of intermediate goods—inputs required by U.S. producers for their own production processes.

Antidumping duties on magnesium, polyvinyl chloride, and hot-rolled steel, for example, enable petitioning U.S. companies that often dominate domestic supply of raw materials to foreclose alternative sources and then thrust higher prices on their U.S. customers. But those customers—U.S. producers of auto parts, paint, and appliances—who consume the now-restricted raw materials to produce higher value-added goods and who might otherwise create jobs, are instead made less profitable and less competitive, burdening the broader economy.

But here’s the kicker. The statute itself forbids the administering authorities from considering the economic impact of antidumping restrictions on those firms or on the economy at large. The well-being of the petitioning industry is all that matters and the collateral damage to downstream industries and the overall economy is to be ignored.

Now, the high-profile antidumping and countervailing duty cases recently initiated against solar panels from China are shining some fresh light on this outrage. A group called the Coalition for Affordable Solar Energy (CASE), which represents the portion of the U.S. solar industry that is downstream of the solar panel producers (the producers’ customers), is asking the cases be dropped or settled. CASE, representing 145 member companies that employ over 14,000 workers in solar project development, logistics, construction, and installation, argues:

The severe tariffs [being sought] would have a very damaging effect on the solar industry in the United States and would fundamentally undermine many years of effort by all of us who care about the future of solar power …

In simple dollar terms, [the] petition threatens the planned installation of solar electric power systems in the amount of $11 billion in 2012 and the potential installation of $60 billion currently in the total pipeline …

By asking government to interfere and artificially increase the price (equivalent to putting on a high tax) will only hinder the deployment, cost thousands of jobs … and further negatively impact an already shaky economy.

There is no good reason for arguments like these—and the facts supporting them—to be ignored in trade remedies cases. Several other major countries that have antidumping and countervailing duty laws on their books employ a so-called public interest provision that directs the authorities to deny duties when the likely costs are demonstrated to exceed any benefits to the petitioning industry. (See page 18 for an elaboration.)

It is difficult to fathom how an administration that begs U.S. businesses to invest and hire would not be pushing hard for this particular reform. After all, the administration acknowledges the importance of ensuring downstream producers have access to imported inputs. The Office of the U.S. Trade Representative has argued this point in its complaint against Chinese export restrictions at the World Trade Organization. And the president himself described how the competitiveness of U.S. firms is hurt by restrictions on imported inputs when he signed into law the Manufacturer’s Enhancement Act last year.

But then again, incongruities in this administration’s economic policies seem to be the rule, not the exception. In the solar panel case, the president has offered his rhetorical support (at least) to the petitioners, even though their success would drive up the cost of already-too-expensive solar power, reducing demand for an energy source the president has been advocating and subsidizing with the incentive of 30 percent tax credits.

I suppose the White House has determined that the cost of import duties—to consumers up front and to taxpayers through the a much higher tax credit—is worth the benefit of having a Chinese scapegoat to take the heat off the president for Solyndra’s failure.

Politico yesterday reported that Agriculture Secretary Tom Vilsack is upset. According to him, the USDA just don’t get no respect:

Agriculture Secretary Tom Vilsack wants to spread the message to anyone who’ll listen: The U.S. Department of Agriculture isn’t just about farming anymore.

“This department is not appreciated,” the former Iowa governor told POLITICO in a recent interview. “We are engaged in virtually every issue and always can provide some support and some meaningful solution to a problem that is vexing folks.”

To prove the point, he challenges anyone to name an issue that doesn’t touch the department’s portfolio, from bolstering national security by helping wean Afghan farmers from growing opium — a cash crop that funds Islamic insurgents fighting U.S. troops — to providing USDA-backed home loans as a way to repopulate the sparse countryside. [emphasis added, with disgust]

Not bad for an agency that shouldn’t even exist.

I’ve written several times about the foolish War on Drugs, which has been about as misguided and ineffective as the government’s War on Poverty.

So when I saw a news report about a couple of Swedes getting busted for smuggling 200-plus kilos of contraband into Norway, and then another story about a Russian getting caught trying to sneak 90 kilos of an illicit substance into the country, I wondered whether these were reports about cocaine or marijuana. Or perhaps heroin or crystal meth.

Hardly. Norway’s law enforcement community was protecting people from the horrible scourge of illegal butter.

Sounds absurd, but there’s been an increase in the demand for butter and high import taxes have created a huge incentive for black market butter sales. Here’s a video on this latest example of government stupidity.

I guess the moral of the story is that if you outlaw butter, only outlaws will have butter. Or perhaps butter is the gateway drug leading to whole milk consumption, red meat, salt, and other dietary sins. Surely Mayor Bloomberg will want to investigate.

By the way, the United States is not immune from foolish policies that line the pockets of criminals. Here’s a video from the Mackinac Center revealing how punitive tobacco taxes facilitate organized crime.